January 2, 2009

Dairy can’t turn off supply spigot

The economic downturn has backfired on U.S. dairy farmers, who had added cows during good times and now find supplies dragging prices down, observers said.

Everything was going great, Hanford, Calif., dairy farmer Joaquin Contente told The New York Times. Then this financial crisis came along and shoot, the whole thing came to a halt, he said.

Farmers who added cows while prices were up cannot simply turn off a switch, like someone shutting down a factory, the Times said.

In past months American farmers had found a burgeoning market for powdered milk, butter, whey proteins and cheese in places as far away as Mexico, Egypt and Indonesia. But, the global scale back in buying now has U.S. warehouses filling up with the surplus, contributing further to falling milk prices.

Powdered milk prices have fallen from about $2.20 a pound in 2007 to about 80 cents a pound today. Fresh milk has dropped from to $3.67 a gallon from a peak of $3.89 a gallon in July.

The thing is, they are going to produce it because they have to milk the cows, warehouse owner Roger Van Groningen said.